The decision to cut the tax from 80% down to 70% for newly imported cars by Ministry of Finance at the beginning of August has worked out quite well, and the cars imported have gone up continuously and quickly accounted for 40% of the market share.

>Cutting tax to lower car prices

According to General Department of Customs, after eight months with two times of cutting down o­n import tax for completely built cars, the number of cars of under eight seats has exceeded the figure 5,800 cars. In August alone, even though it coincided with lunar July when consumers abstained from shopping, the total number of under-eight-seat cars imported still came up to 650 o­nes.

This is an outstanding growth because the figure 5,800 cars (including five-seat cars and versatile MPV/SUV) of the first eight months is 60% higher than the total imported cars of the whole 2006. Since April, under-eight-seat cars arriving at the port every month have always been more than 700 o­nes, while during the 12 months of 2006, there wasn�t a time the number of imported cars exceeded 450 o­nes.

Advantageous tax policy together with exciting market are gradually turning imported cars into a considerable counterbalance with locally assembled o­nes. If taking all kinds into account, including trucks five-seat cars, and versatile MPV/SUV, the number of cars imported during eight months has gone over the figure 10,000 o­nes, equal to that of the whole 2006.

If basing o­n the market share, imported cars have remarkably gone up from 12% of January to 30% of July. An authority from General Department of Customs judged that if Ministry of Finance continues to cut the tax, this rate can go up to 50% at the end of the year. Then, imported cars will officially be balanced with locally assembled cars, and impose a considerable pressure o­n the joint ventures.

In his opinion, presently o­nly the car line of over 40,000 USD suffer the pressure from imported cars. However, with the support from the head company together with appropriate tax policy, there is possibilty that imported cars will affect domestic cars with the price of under 40,000 USD.

For example with an imported Hyundai Santa Fe, if the equipments are omitted, and one axle is equipped in place of two axles, automatic gear replaces manual o­ne, the price can go down to 35,000 USD form 45,000 USD, which is equivalent to aChevrolet Captiva LTZ including the cost necessary for getting the car early.

The growth of imported car segment has attracted the attention of most of the world-famous brands. After Nissan, Hyundai, Peugeot, Land Rover and Kia have had official distributors, recently two German �big enterprises�, Porsche and BMW, have set up the first showrooms in HCMC. According to the initial information, Audi is also looking for a distributor in order to make use of a richly potential market like Vietnam.

Domestic car prices will be lowered

After cutting completely built car imported tax from 80% down to 70%, Ministry of Finance hopes that when a lot of cars are imported, domestic cars will be under pressure. Nevertheless, against the agency�s expectation, domestic enterprises still observe the market with reluctance without any indication of reducing the prices.

No longer counting o­n the willingness of members of Vietnam automobile munufacturers� association (VAMA), recently Minister of Finance Vu Van Ninh has declared stricter policy, that is: �Continue to cut imported car tax�. This senior authotity assumes that although tax policy doesn�t have a direct impact o­n locally munufactured car prices, the enterprises must lower the cost to compete o­nce there are a lot of cars imported resulting in the abundant domestic supply.

Besides new cars, Ministry of Finance informs that they also consider tax amendment to used car commodity. Director of Tradoco company � specializing in importing used cars in HCMC � Mr Phan Huu Tam assesses that the automobile market during the remaining time of the year will be bustling if the Government continue to cut tax o­n new and used cars.

According to Mr Tam, used car taxation has just taken effect since 10/9, so it hasn�t affected the market very clearly. �However, if Ministry of Finance continues to cut import tax o­n this commodity, I can assert that consumers will be the benificiary of low-cost, high-quality product�, said Mr Tam.

Presently Tradaco is importing 30 cars a month at average. This figure is predicted to go up by at least 30% it tax is cut in the future.
(According to Vnexpress)